Indian stock markets created history on May 18, 2009, when trading was halted for the day, after the markets hit upper circuits twice within hours of opening. This happened for the first time since the inception of the stock exchanges. The euphoria was due the results of the General elections that saw the emergence of Indian National Congress as the single most party thereby giving UPA a clear mandate. It must have been heartening for the equity investors to see their wealth appreciate rapidly in such a short span of time, especially after a painful and treacherous 2008. The optimism clearly underlined the fact that investors want stability at the centre and clarity on policy front.
Markets always react in a big way to big events like the outcome of General elections, Budget, Monetary policy, War etc. Therefore, as investors/traders, we all have some curiosity/expectations from policies/guidelines issued by the people at the helm of affairs that decide the course of the industries and economy as a whole.
Even though Indian economy has been quite resilient compared to the overall gloom in the global economy in the last one year or so, a lot needs to be done to keep the economy on growth path. A lot of industries suffered heavily due to the financial crisis in the western economies. There will, therefore, be expectations that government will offer soaps to various sectors and provide stimulus to keep the growth engines firing. Mr. Mukherjee’s budget is likely to be against the back drop of UPA governments’ mantra of ‘inclusive growth’. Even though the focus will be more on a number of programmes aimed at the poor section of the society, there will definitely be something for the interested parties.
Here are a couple of sectors and companies that are likely to be impacted by the Union Budget 2009-10.

Hospitality Industry

The major concern in this sector has been the lack of entrepreneurship. The reasons attributed to this are – the larger gestation periods and inability to raise funds for hotels at cheaper rates. Service tax is another issue which the industry would want Finance Minister to address. Repealing of service tax on various services provided by hotels will be a big boost for the sector as a whole.
The stocks to watch out for: 1) Indian hotels 2) Asian hotels

Textile sector

Textile is the sector to watch out for in this budget. One of the biggest providers of jobs, the industry was most affected because of recession in the west. With orders from US and UK falling, the industry’s demand for excise duty cut, extension of duty draw back and faster refund from Technology Up gradation Fund will help them remain competitive. Considering the problems faced by this export oriented sector the finance minister will most likely provide support for this sector in his budget on May 6.
The stocks to watch out for: 1) Alok textiles 2) Gokaldas Exports

Steel

One of the sectors that has grown in leaps and bounds in the last couple of years has been the Steel sector. Such has been the growth of this sector that India’s position, in terms of production of steel, has improved from fifth to third in the world.
But of late Indian steel industry has been under pressure because of cheaper imports from countries that have built up unsold inventory and /or excess capacity. To safeguard the industry government is expected to hike import duty on flat steel products to 15% from 5%. There is also a proposal to cut duty on Ferro nickel to 2% which will bring down prices of utensils and other steel products by as much as 10% there by boosting demand.
The stocks to watch out for: 1) SAIL 2) JSW Steel

Infrastructure

The UPA in its manifesto has emphasised infra as priority to tackle current slowdown. The finance minister is likely to issue statements in this regard in terms of low interest rates and availability of funds.
The stocks to watch out for: 1) GMR Infra 2) GVK power 3) Reliance infra 4) IRB Infra 5) IVRCL Infra

Retailing, Aviation, Education and Media

The major boost in these sectors will likely come in the form of increase in FDI. With reforms being initiated in the priority sectors especially Education, entry of FDI will augur well for companies in this sector.
The stocks to watch out for: 1) Everonn 2) Educomp 3) Pantaloon

Nuclear energy and Power

Government would encourage increased participation of private players especially Indian companies in the area of nuclear energy. There will also be emphasis on faster implementation of power projects.
The stocks to watch out for: 1) L&T 2) Suzlon 3) Power Grid 4) Areva T&D 5) HCC

Real Estate

Increased benefits from SEZ policy, easing liquidity and emphasis on low-cost housing will augur well for companies in this sector.
The stocks to watch out for: 1) HDIL 2) DLF 3) LIC Housing

Agriculture and Rural

The government is expected to put more emphasis on these sectors.
The stocks to watch out for: 1) Jain Irrigation 2) M&M 3) Hero Honda 4) SBI
Over all this budget will definitely have something for traders and investors to watch out for. Let’s wait and see. Happy trading.

Article  by Sachin Raut technical analyst from pune

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